What Really Happens at a Fed Research Conference

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0:42Okay, so thank you all. The next paper is going to be presented by Omar Barbiero, U.S. firm's exposure to import tariffs, a comparison of the 2019 and 2025 episodes. Can I ask a personal question? When you present a paper like this at a research conference like this Boston Fed one, So you get nervous. And then I guess adjacent to that, like what's the best outcome for you when you present the paper? And what's the sort of nightmare scenario? Would it be someone like finding some fundamental error in the methodology and like standing up in the middle of the conference and being like, there's a serious problem here?

1:25Yeah, I mean, many, many nightmare scenarios. Sorry, I was just clicking randomly and then we went. Okay. All right. I would say the worst thing that can happen is that you just say something wrong that sounds dishonest almost. Like you're trying to hide something. Like there's clearly a data flaw and then you don't highlight it or you say in public, no, no, no, this is not a problem. And everybody knows that. No, no, it's a problem. I think the profession is built on trust. And if you lose that trust, it's quite bad. That's Omar Barbiero, a senior economist at the Federal Reserve Bank of Boston.

2:10He's getting ready to stand up in front of a room full of other economists, journalists, academics, and his employer, and present a research paper tracking the exposure of U.S. businesses to import tariffs. This is a paper written jointly with Slavic, Hilary, and Alvaro, who are there. There happened to be in the room our excellent research assistants, Sophie and Lilia, also, who helped us with this paper. We wrote it for the conference. It's still quite preliminary. And therefore, we really value your comments on this. But how many individual pieces of data would you say were involved in this particular study?

2:54Okay, product code, they were around 400 ,000, I would say. And then you have to multiply that by many different countries. And so you have to keep track of that matrix. The supply chain dataset was also quite fun because it's kind of a network of companies and it gets big very, very fast. and you have to track it over time. I have to say, I mean, we have excellent, I mean, I have excellent co-authors. We have excellent research assistant. We have excellent, you know, computing power. Thank God that can help us with that. And I don't know. Hundreds of thousands, millions? Ah, yes, millions.

3:47We're at the Boston Fed's annual flagship research conference. This is the 69th year of the event, and the theme for 2025 is, quote, the U.S. economy in a changing global landscape. So focusing on how things like tariffs, geopolitical tensions, industrial policy, AI, etc., are reshaping U.S. growth, inflation, and the overall financial system. Clearly, that is a very rich vein to mine for research. And the format is a classic central bank research conference. Economists and other researchers are invited to write a paper for the event. They're assigned an official discussant, and then they publicly present to a room full of their peers while the audience gets a chance to ask questions or sometimes critique.

4:30Yeah, you say it's a classic central bank research conference, but we've never actually been to one. I don't think, right? It felt like a totally new environment. Yeah, it's true. We have gone to Jackson Hole for the past few years, which is probably the most famous Fed research conference. But it's famous because the Fed chair usually makes a speech and that gets all the attention. We've never actually been in the room at Jackson Hole where they discuss the research papers being presented because the Fed only allows a certain number of journalists into the room. The room. The room. The room. Also, I think it's unfair Kansas City Fed gets to hold their conference in the most beautiful place on earth.

5:10Instead of Kansas City. The middle of August. And then the Boston Fed. I mean, it's their choice, but the Boston Fed has theirs in Boston, which is lovely. We both had a great time. But November. It was very cold. Well, the upshot is that this time we were actually in the proverbial room. So for the first time, we got to really experience and learn what an economic research conference actually is. Yeah, this is actually very key because if you sort of like wonder, so, OK, Jerome Powell says something about, you know, the expected relationship between tariffs and inflationary. But where did these ideas come from?

5:46Where are these assertions, predictions and so forth? It comes from academic research. It comes from the research backing that up. These conferences are where the macro ideas sort of actually collide with real world data. Yeah, another way of thinking about it, it is where the first serious drafts of tomorrow's policy debates are aired. And we're going to give you a front row seat to experience what those initial drafts and debates are actually like. Welcome to the Boston Fed's 69th Annual Flagship Economic Conference.

6:28do research at the regional bank, at the board, or at the BIS, you do policy. By policy, we mean, you know, you advise your principals. In our case, that's Susan Collins, the president and CEO of the Boston Fed, preparations for the FOMC meeting, for public engagements. That is Egon Sakrajevic. He's director of the research department at the Boston Fed, and he's the one who actually puts this event together. And he's Omar's boss. Yeah, and he's Omar's boss, right? He also gets to choose the broad theme of the conference. We've lived in a particular global order, rules-based international system, globalizations, trade integrations.

7:10We just took those things for granted for decades. And we're now grappling with monumental change. And we lack models. We lack theoretical frameworks to understand these changes. You've heard many debates about this data is no good. This is the sausage. Don't eat it, right? And how does one go about it? So I think it's just, it's just really, I mean, it's an exciting time for researchers because we have great questions, but I think it also underscores of just how little we really know and how challenging it is then to make policy recommendations in the period of such change. You know, the way a conference like that comes together is, you know, we sit together, my team of researchers, we try to pick a topic that would obviously be timely, relevant to policymakers.

8:02We confer with Susan and so forth. We look around, you know, and so forth. So once we kind of zero in on what the topic is, we then have to identify the contributors to this. We have a certain idea of what we want different sessions to be. Then we get either academics or, you know, contributors to write papers for this. But, you know, academics, researchers write what they want to write. So sometimes there's a bit of a, you know, say we say, you know, gentleman-like distance between the blurb and the ultimate paper that gets written. But that's all right. We've always seen this. This is very, very standard.

8:41And, you know, the idea is then is to, the role of a discussant then is to kind of bring that paper and provide some context and try to fit it into the general theme. So this particular conference, the theme has changed, right? And one of the things we keep saying, but I think it's true, is we are living through capital age history here. We have the tariffs from the Trump administration, the reversal of globalization, new geopolitical risks, AI, all of it. Right. And we're also still trying to figure out stuff like what happened in relatively recent years. Why did inflation actually spike during the pandemic?

9:16We're also in this new era of industrial policy, and we're trying to figure out what that means for the economy. If we actually want to do the stuff, like make semiconductors or build small, modular nuclear reactors, we have to have some idea of where we're going. And we try to really keep it, you know, I would say somewhat more accessible, I would say a bit interdisciplinary. We try to reach a bit broader audience. It's somewhat a typical conference, your typical economic research conference, which feature slide after slide of equations, graphs. I'm laughing slightly because I saw some equations this morning and the speaker is like, oh, well, as you can see from this slide, and I'm thinking, I cannot see.

10:01Right, right. So I would say this is very light on this. This is super light on this and so forth. We urge authors to try to write something that's more, I would say, policy relevant, that touches, that can be communicated and stuff, rather than very, very technical pieces. That is what the academic journals tend to specialize. Hopefully it sparks an idea. Yeah, it sparks a new paper. It says, ah, you know what? This is an interesting result, but I have maybe better data to do that. So let me actually, or there was a testable implication that somebody brought up. Let me see if I can flesh that out because I think I can provide some.

10:47That's how knowledge in conferences advances. It's a very organic, a bit of a messy type of affair. And to be honest, many times, they don't pan out. You know, I have files and folders full of research ideas that, you know, never went anywhere. But you try. And if you want to get a sense of that process and the policy implications of some of this research, take a listen to the first paper presented at the conference. It's by Shepnam Kalemli Oskine. She's the Schreiber Family Professor of Economics over at Brown University. I love economists and their long title, the John Maynard Keynes chair of the Ludwig Wein, Mises and Dowd seat at the University of, you know, whatever.

11:33Keynes chair at the Mises school would be an interesting mix. Anyway, here's Shabnam presenting her paper. It is called Global Networks, Risks and the U.S. Economy. You know, paper after paper, we realize the issue with the conventional macro open economy view. What is this view? This view takes US as a relatively closed economy because of the low trade shares, exports 10 % of GDP, imports 14 % of GDP. And that, of course, combines with the fact that US is governing the world in terms of dollar dominance and deep financial markets. and on top of that US has a amazing central bank as we are all here right now you know that Federal Reserve acts as a global lender of last resort when things go south the benchmark implication of this view is that US has limited exposure to global risks you would like to revisit the issue in terms of asking directly how sensitive the US economy to global risks once the account for full global trade production and finance networks and really think about trade-off and counterfactuals and basically revisit this issue that the fact that maybe your trade shares are low.

12:54We caught up with Shebnam after her presentation to better understand exactly what she's trying to do here. All right. So, yes, we found something different because we work with networks. And let me explain what that is. When you say networks, again, the traditional view, first going to think about, of course, the trade networks. Why? Because the trade networks directly link to supply chains. Right. And we already realized, you know, it is those are vulnerable. I mean, you know, shock after shock, starting with the pandemic, you know, told us that, yes, maybe kind of our final goods trade or just if I focus on manufacturing, not that big.

13:34But if I look at the supply chains, value chains, then US is integrated to that. And then that changes the things. Because that means even in the aggregate number, you might not see that big of exports and imports. There might be indirect exposure through all those things. Because when you think a network, you are linked through trade. This is now where we also add to the traditional view. But you also have to think about the financing, right? I mean, so the networks to us is trade networks. Yes, countries buying and selling, sectors buying and selling, firms buying and selling from each other, but also financial networks.

14:09I mean, investors investing in companies in other countries. The supply chains financed by different investors in other countries. And on top of that, of course, the production, right? I mean, so a product right now is assembled in one country, designed in another country, manufacturing in another country, with parts coming from many, many countries, and skills and knowledge also coming from many, many countries. So when you have this type of a comprehensive view of the network, global network, as trade, production, and finance, then I think U.S. becomes very vulnerable to global shocks and global risks.

14:44So you could see why this would be an important area of research for the Fed, right? Right. And the conventional thinking has always been that the U.S. is kind of insulated from global shocks because it's so big, because the dollar is so dominant. External factors, it's thought, don't really affect the U.S. economy so much. Right. And also, we don't actually export that much, relatively speaking. Right. We import. So that's the conventional view. But if, per Shebnam's research, the U.S. is in fact more exposed to global shocks than previously thought, if it's more intertwined with the network of the global economy through second order effects, then policymakers should be aware of that, right?

15:22This wasn't clear. This is an enormous body of work spanning several papers, hundreds of pages, all with many applications and scenarios. That is Aaron Flan. He's a principal economist at the Boston Fed, and he's also the discussant for this particular paper. The discussant role is really interesting. Yeah, this was probably one of the most fascinating sort of dynamics, which I knew existed but didn't quite appreciate how it works. So basically every presenter gets paired with an official discussant whose job is just to interpret and critique, frankly, the paper for a wider audience. So those are those are my my main comments.

15:57I do just want to emphasize that what 7NEM is doing here is policy-relevant research at its finest. It's our profession working at its finest for answering these very timely questions in ways that... Authors are very close to the paper. You wrote these details, and you can see in the presentations, right? They know inside out and stuff like that. So they provide a presentation. Really what a discussant does is sort of essentially, let me translate what the author does for the broader audience, right? A good discussant's role is really to sort of reframe the paper, pull out key takeaways, and then provide some constructive comments.

16:38But sometimes things get a little awkward. Definitely awkward, but, you know, everyone is still very polite. Still very polite, yes. But more on that after this break.

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18:09Let's go to another paper. This one is by Tommaso Monticelli. He's a professor of economics at Universita Baccioni. And his paper is called Supply Chain Uncertainty, Energy Prices and Inflation. And it is actually about one of our favorite topics, Joe, supply chains. No, that's right, because that's exactly right. So supply chain disruptions can sort of change the state of the economy. So the environment, that's our idea, where firms make production and pricing decisions, right? And so the key idea is that the state of the world in which firms operate can change underlying. So as economists, we say that the state of the economy changes, even starting from potentially minor events along the supply chain.

19:08So we make the example of this apparently small episode, like in the Suez Canal two years ago, sort of a ship, container shipping oil and other inputs got stuck for a few days. We remember it well. Yeah, we remember it well, yeah. But that episode sort of got resolved in a few days, but I didn't have the time to show the data. But then the effect on transportation disruptions along supply chains lasted for months. So the analogy here is, think of an airport, like a hub, where a lot of flights... So how many airports function as hubs, many flights coming from different directions. And you can have a disruption, like a single delay on a single flight in the hub.

20:02But then this propagates along the day and then across many different flights and amplifying the delay downstream. A cascade effect. Yes. So at the heart of Tomás' research is this sort of very important question. Are supply chain disruptions real? Are they a real thing or are they simply manifestations or symptoms of excess demand may be caused by too much fiscal stimulus? Yeah. So after the pandemic, a lot of people criticized the government for handing out checks to people and businesses helping supposedly to fan inflation. But actually, if small supply chain disruptions can reverberate for longer than previously thought through energy prices or whatever, then per Tommaso's research, they can be a pretty important source of inflation.

20:50And the important thing is that it's not the size of the supply chain shock that matters. It's the actual volatility itself, the uncertainty that matters for inflation. Right. So, again, I think, you know, you can see why this would be of interest to policymakers. Even five years after the pandemic, we're still trying to figure out exactly what happened. And we'll probably be researching that for years. Totally. Yes. So here in our research, we emphasize the interaction. So the complementarity between shocks to, let's say, the price of oil, that typically central banks look at, but they have a typical attitude, let's say, in normal times.

21:31If there are oil shocks, yes, we should monitor that those shocks are not too persistent, they don't feed onto inflation expectations and so on, but their attitude is typically, let's look through. OK, this oil prices jump around very much in markets. But here we are saying even the same original, let's say, oil price shocks or energy gas price shocks, they can have a very different amplified effects on inflation, OK, depending on whether the state of supply chain is disrupted or not. So it's not really that we believe that we emphasize supply chain shocks. We say typical supply shocks like oil shocks or gas price shocks, they can get really amplified and in a very persistent way if the underlying conditions of supply chains are disrupted.

22:33So that state of the economy should be monitored. And in those states of the world, the central bank should be very, very reactive, way more reactive to oil shocks or energy price shocks than in periods where supply chain disruptions are minimal. So that's the basic thrust of the paper. And the data seemed to bear Tommaso's thesis out. But things got a little awkward when it was time for the discussion. Hi, I'm Ludwig Straub. I'm a professor of economics at Harvard. I'm a quantitative macroeconomist, so I try to build models that describe the macroeconomy and can be used for policy analysis and forecasting.

23:13I'm a discussant of a paper on supply chain uncertainty and energy shocks and how those two relate to the post-COVID inflation episode. Right. As Ludwig puts it, being a discussant is a pretty big commitment. And we should just mention here that neither the researchers nor the discussants are getting paid for their time. They're doing this for other reasons, obviously to contribute to policy. But there's another big motivation that we'll get into in a minute. So here's Ludwig. So not everybody has time and energy to do this. In my case, I love being at the Boston Fed and I'm close. So it's not a big travel to come here.

23:50And yeah, so I said yes. And, you know, about a month before the conference, you typically receive the paper and then you spend a significant amount of time. I'd say maybe half a week, a week, you know, of your research time with the paper and trying to understand the ins and outs, trying to understand the empirics, the model, and then hopefully give a balanced view of the paper during the discussion. And from what we saw at the conference, it feels like discussants can have different styles. Some basically summarize the paper and explain why it's relevant. And others, others, you know, maybe pick it apart very critically.

24:29Here's Ludwig talking about the discussants. Some tend to be more like what you just mentioned, more like the latter that, you know, pick apart papers and kind of come across as a little bit destructive rather than constructive. You know, the last discussant at the conference was a lot more constructive, for example, and would be, you know, building off the author's results and, you know, showing them what they could do next with the paper. Some are very, very kind and just praise the results, which I tend to try to be somewhere in between. You know, I tend to shed some critical light on the author's results if that, you know, is something that I think helps understand the paper.

25:11But I also want to be constructive and I want to be kind to the authors, too. So, you know, you want to kind of balance those two sides, I guess. And Ludwig did shed some critical light on Tommaso's research. Suggestions for improvement, we can say. Suggestions for improvement, right? That's a good way of putting it. So as the economy reopened, as we had ample fiscal stimulus, and I tend to think that that means we ran up a marginal cost curve, meaning, you know, costs went up just because there was a lot of demand. And so bottlenecks emerged, ports got clogged. And I think that alone can lead to an increase in what looks like supply chain issues, even though they're not really the root cause of things.

25:57Now, I still think this paper has has a lot of merits to it. But, you know, I tend to think that not all that looks like an energy shock is really, truly a shock rather than just a consequence of increased demand. Tommaso also used the Baltic Dry Index as a proxy for shipping costs, which, as anyone who has spent a bit of time on finance Twitter will tell you, is an index that gets criticized a lot. Exactly. And then if it's just one episode in that time series that's kind of responsible for some of the results, then I would worry about that. Now, I don't know if that's exactly what's going on, but I did play around a little bit and it was not as robust as, you know, I was maybe hoping it or they were maybe hoping it to be.

26:43So, Tracy, speaking of Twitter, you know, look, both you and I are used to getting criticism, right? But even if you're used to it, I think it would be pretty uncomfortable to have your work sort of publicly criticized by one of your peers in front of a big group of peers. Yeah, I would think so, too, although Tommaso actually seemed pretty fine with it. No, okay. So that you learn out of experience through time, right? That you have to filter the reaction of the audience and get the good and the bad signals. So first of all, I had great comments, very useful. Both myself and my co-author are very happy.